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Watch each Friday for Doug Ferguson's Market Intel blog on Beef Producer.

Just one week changed the market again

As options tighten up in the cattle markets, now is the time for patience and rational thinking.

Last week I knew I could put a smile on faces opening with the word “higher.” I also predicted strong bidding competition and that the gaps would fill, and that we needed to be ready to act quickly. I had no idea it would take less than a week.

Many people saw the prices paid during last week’s rally and decided to sell cattle this week. It may have been the thing to do early in the week, but by yesterday I saw consignors PO their cattle (no sale). With the market running $5 to $25 lower I can’t say I blame them. They have only a few seconds to make that decision.

We are in uncharted water right now, with an overabundance of uncertainty. While I still believe the market is giving us opportunities, I have one big concern. With news of packing plants closing, temporarily, and workers in those plants getting restless, it raises concern that one or maybe more may close, creating a Holcomb-plant-fire situation all over again. I am not writing this to generate fear. I’ve written before about the value of time. Usually this means speeding up your turnover. Right now it is my opinion that the more time you can place between now and your end point, the better. To me this makes the little cattle the best hedge against time.

When I look at the value of gain (VOG) this week, little cattle are by far the highest, and really the only ones that have a VOG above cost of gain (COG) in the feeder spectrum. The VOG falls off a cliff above 500 pounds. In fact, at every auction I attended or market report I looked at this week I could see a weight that brought less dollars per head than the weight class right below it. I sound like a broken record stating that once again this is not a weight-gain business, at least through part of the spectrum.

I heard there were some fats that traded at $1.12. The good news is we can profitably replace those fats with cattle weighing over 700 pounds, so this signals us it pays to finish them. So, here I am talking out both sides of my mouth again for the second week in a row. Let me explain: I state that I think it’s best to put time between you and the end point, that is my opinion. I state the market is signaling it pays to finish them, that is the math. This is when we need to know and understand ourselves and what our program is geared toward.

This week unweaned cattle were $4-$17 back, and feeder bulls were $4-$30 back. This brings me to something else to think about. Since some people are holding their cattle due to the market yo-yo, you may want to consider weaning and processing them.

I want to offer my definition of weaned; it is a minimum of 30 days. A short wean will cause many buyers to sit on their hands. This week I saw a string of over 100 head sell right off the cow. These were fancy black calves. They were $13 back of plain cattle that were weaned. That’s too big of a pile of cash to leave on the table. It’s also a good opportunity for a buyer to add some value.

I didn’t see any bred females or pairs sell this week. This was supposed to be a week of female sales but these were the ones I mentioned that were cancelled. One thing that did get my attention is with the price drop on the heavy feeders this week it looks like a buying opportunity to purchase some of these feeder heifers and breed them.

In conclusion, this week I want to remind readers to know your numbers and to be patient. I saw some fierce bidding this week for grass calves. If you are doing buy-sell marketing and buying calves at the prices I saw being paid this week it will take a 30% rise in the market by summer’s end to break even. Now, we just saw that market can do that in one week. I ran my own numbers on those prices, and as you know I am doing sell-buy marketing, so I can either profit or lose money on the buy. What my numbers told me is I would be better off to pay the pasture rent and not even put any cattle on it. The thing is, I know there will be opportunities to buy grass cattle coming up, and if not I can make hay off the pasture.

I have mentioned before the inventory triangle of livestock, money and feed. Money and feed are at the base of the triangle, making it stable. And cattle are on top of the triangle, making them optional. My point is, don’t get caught up in thinking you must put cattle out there because you owe the landlord a check. Protect your base.

Like the Chinese proverb says “may you live in interesting times.” We’ve got that covered.

The opinions of the author are not necessarily those of Beef Producer or Farm Progress.

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